TOV Injury and Safety Blog

Leveling the playing field

        In an attempt to "level the playing field" between insurers and policy holders, the Democratically-appointed Michigan Insurance Commissioner has responded to the Michigan Supreme Court's refusal to examine insurance policies.  In a 2005 decision, the four most conservative members of the Michigan Supreme Court held that "a court must construe and apply any unambiguous contract provisions as written, and that "the judiciary is without authority to modify [insurance] contracts".  This holding allowed Michigan insurers to insert discretionary clauses into insurance policies which had the effect of denying coverage to paying insureds.  For example, a clause requiring the insured to file suit to collect uninsured motorist coverage within one year---even before the at-fault was declared "uninsured" by his own company---was upheld by these Justices.

        Since insurance coverage may be mandatory and the insured is not provided a copy of his policy when he purchases it--and thus cannot even read the terms of his policy at the time it is issued and paid for [or on receipt, for that matter], in most states, the courts reserve the right to pass judgment on the ultimate fairness of policy provisions.  This is called the "rule of reasonable expectations", and it was also a recognition of the unequal bargaining power of insureds and large, corporate insurers.  The concept was that the insurer could not use coverage exceptions or fine print to deny coverage that a reasonable person would believe he or she had purchased.  Michigan had followed this rule, at least in substance, for more than two decades. 

        The four Supreme Court representatives who had been hand-selected to protect the insurance industry and appointed to the appellate courts by Governor Engler, asserted in 2005 in the Rory v. Continental case that the Michigan judiciary did not have this power because they argued that the power to regulate policies had been reposed in the Insurance Commissioner.  Acting in belated response, the Insurance Commissioner has finally put into place rules that outlaw such discretionary clauses, and denying the companies the right to unilaterally insert favorable provisions into policies that they write.  This is not a complete solution to the problem created by the pro-insurance Justices, however, it is a small step in the right direction of protecting consumers from large corporations with overwhelming bargaining (and lobbying) power.

Your money or your life?

   A recent study published in the Journal that serves Dermatology specialists contained depressing  news relative to the American medical profession.  The authors performed an extensive survey/investigation to assess how long it takes to schedule an appointment to see a Dermatologist.  In particular, they wanted to compare the time it takes to get in for a lucrative, cosmetic procedure such as injecting Botox, with the time it takes to be seen for a worrisome, potentially cancerous mole.

        The authors noted that because patients must pay cash up front for cosmetic procedures, and because they involve no paperwork, third-party payors, or regulated prices, Botox injections are more lucrative than normal (medical) office visits.  The authors also noted that worrisome moles can be deadly melanoma and should be examined promptly, since pre-metastasis, they are not life-threatening, but if present for too long they turn fatal. 

        When they compared the average time to be seen by the doctor for these two exemplar problems, the authors found that your money is more important than your life:  the average time to be seen by the dermatologist for a Botox injection:  8 days.  The average time to be seen for examination of a potentially cancerous mole:  26 days.  When asked to comment for the media, the head of the national Dermatology society suggested that "patients who are concerned about a cancerous mole must insist on being seen urgently".  More evidence of the need for patients to be assertive to protect their own health, and more evidence that in America, on average, your money speaks more loudly than your health.

The jury or the four conservatives on the Supreme Court?

        In 1974 when the Michigan legislature established Michigan's "no fault" auto insurance scheme, it limited those accident victims who could sue a wrong-doer (and indirectly the wrong-doer's insurance) to persons who had suffered death, permanent serious disfigurement or a serious impairment of bodily function.  The latter definition is the one which has received the greatest scrutiny by succeeding legislatures and courts.

        Initially, the courts noted the Legislature's failure to define a "serious injury" and ruled that it must be left to jurors to interpret in accordance with the common understanding of the word.  When insurers pressed for a "catastrophic" definition of  serious, the Supreme Court eventually intervened and restored the original "serious" language of the statute.  The Legislature then revisited the no fault act and helped to provide some definition to "serious" by requiring that the injury be "objectively manifested" and that certain factors be considered; it rejected a "catastrophic" definition and retained the common sense "serious" interpretation.

       In 2004, however, Michigan's very partisan Governor enjoyed the opportunity to appoint several very conservative, insurance-oriented Justices to the Supreme Court bench.  He seized this opportunity and appointed to the Court special interest advocates such as the chief counsel for AAA Insurance and the husband of his own Chief of Staff.  Forming a narrow majority on the Court, these four appointees immediately granted several large favors to the insurance industry.  One favor was the re-definition of "serious" for which insurers had lobbied for thirty years, and which had been consistently rejected by the legislature and the courts.

        In the Kreiner case, the Supreme Court majority held that to be "serious" an injury must be "life-altering" and that limitations on recreational activities or limitations caused by pain were of limited consequence.  In successive cases, court holdings ruled that a girl who missed a year of school was not seriously hurt; a plumber who was limited to working 20 hours per week was not seriously hurt; a wheelchair-bound victim who was already incapable of employment could not suffer a serious injury.

        In further demonstration that the Court's definition of "serious" is out of touch with the common parlance, another jury verdict in favor of an innocent injury victim has been thrown out by the appellate court based on the Supreme Court's "Kreiner rule".  In Hamilton v. Gross, a Lvingston County jury had awarded a modest verdict to an innocent young man injured through the negligence of Ms. Gross.  The Court reversed and took away this verdict, holding that the young man's injury could not reasonably be called "serious", despite the jury's decision that it was.  The young man (he was apparently under 18) suffered a fractured ankle requiring surgery and was casted for three weeks and on crutches for "six to eight weeks".  He missed eight weeks of work, was severely limited in recreational activities and faced the potential of future arthritis.  The court held that the proofs he presented on these topics were not adequate to meet the Supreme Court's threshold for establishing a serious injury.  We don't know if this outcome reflects poorly on the attorney who represented the young man, or if it reperesents hyper-critical appellate jurisprudence.  In either event, it is one more example of the difference between ordinary citizens' understanding of "serious" and the extreme definition of "serious" which was championed by the insurance industry and its minions in the Supreme Court.

Premium insurance for "premium buyers"

        In a sign of the times, AIG Private Client Group has been active in the Ketchum, Idaho, area spraying fire retardant on some of the million-dollar homes it insures to protect them from the raging Castle Rock Fire.  In more "primitive" (and egalitarian) times, a broad spectrum of the population bought "insurance" that was functionally identical.  They paid similar premiums and purchased similar coverage.  Today, insurers provide a more sophisticated and specialized product that differentiates among socio-economic levels.  The service of spraying homes in the midst of wildfire in Idaho is a good example of this differentiation.

        U.S. Forest Service officers report that for the first time private insurance representatives are present at the scene of a fire being fought, acting to protect assets the insurer has insured.  AIG sells this service to wealthy homeowners, and in a fire-threatened area like the Sawtooth Mountains, where luxury second homes are built by folks like Arnold Schwarzenegger and Clint Eastwood, there is ample market for the product.  Reporteldly, Chubb, Fireman's Fund, and other premium insurers offer similar products to the well-to-do.

        While the availability of "special" private protection in the midst of a natural catastrophe seems relatively new, it is really only another manifestation of the ability of the wealthy to better protect themselves from catastrophe.   Hurricane Katrina provided a more common look at the opposite end of the socio-economic impact of catastrophe.   Such "premium" protection is not new, however.  In most states, for example, motorists are offered "uninsured" (UM) and  "underinsured"  (UIM) motorist auto insurance protection.  In many venues, this is the best bargain on the insurance Declaration Page.  UM protection pays your family member if the person who caused the family member injury is not insured; UIM pays if the at-fault has insurance but the coverage is inadequate.  It is a wonderful product, but also a reminder of why catastrophe often sits harder on the shoulders of the poor and middle class who could not budget for this special protection in advance, given the remote likelihood of need. 

        Several years ago, Michigan's very conservative Governor made an effort to eliminate all motor vehicle liability and to limit all injury or death recoveries to coverage purchased by the victim.  The effort failed due to the negative public reaction:  the public was not ready to insulate drunk drivers from liability and to limit victim compensation to those persons who had been prescient enough, sophisticated enough, and wealthy enough to adequately insure themselves.  Michigan was left with a hybrid "no fault" automotive liability system where only those insureds who had suffered "serious" injury or death could pursue the at-fault driver to recover for their injuries.

        While "premium" insurances are excellent products, and it makes sense to allow consumers to decide which risks they will insure and which they can afford to carry, these insurances are also a tool that allows for further polarization and stratification of American society.  When one segment of the society is immune from the financial impact of even the most profound natural disasters, we're no longer "all in this together".  If the wealthiest one percent, or five percent, or ten percent, whatever, no longer needs to worry about the adequacy of public fire protection, or the need for adequate mandatory liability coverage, or the adequacy of hurricane response infrastructure, we create an artificial dichotomy in the demand for public regulations and services.  This creates one more influence toward a culture of "haves and have nots", such as exists in many third-world nations in Asia and South America.

One small protest

    The New York Times reported on August 29, 2007, that one young mother of four mounted her own protest against the Mattel Company's recent recalls of millions of toys manufactured in China.  The young mom loaded her backseat full of Mattel toys and camped out in the parking lot of the company's headquarters, demanding that executives send someone out to sort through her family's toys and identify those which are safe.  Ultimately the company did that and identified no unsafe toys.  You go, mom.

        In its article discussing this incident, the NYT interviewed company officials at length.  They noted that Mattel closed its last U.S. manufacturing plant in 2002.  It makes about 65 percent of its toys in China.  The remainder of Mattel's toys tend to come from Indonesia and Mexico, with Mexico contracted to build bulkier items that are more expensive to ship.  The lead paint fiasco actually originated with two of Mattel's most trusted manufacturing contractors:  one had supplied toys to Mattel for more than twenty years.  Recently both suppliers had sub-contracted some painting to third-tier suppliers.

Depicting government as the enemy

     Since the Reagan era, it has been fashionable and clever to suggest that government "cannot solve problems; it IS the problem."  This claim has gone unchallenged, politically, and successive administrations have rushed headlong to "starve the beast".  That is, to eliminate government services through denying government the tax money it requires to operate.  We hope that at some point this demagoguery will run its course and people of principle will acknowledge that "the greater good" requires a certain level of governmental expenditure (and tax revenue).

        One would think that recently we have seen enough spectacular examples of the importance and necessity of certain government services to modulate the rabid attack on government:

       Lack of attention to accounting and tax standards allowed Enron to manipulate energy, causing brown-outs in California and eventually wiping out billions of dollars of ordinary people's jobs, investments, and retirements.

       The failure to raise adequate taxes to address decaying infrastructure caused the collapse of one of many wornout bridges (in Minneapolis) and the death of 13 people.

       The government management of levees in New Orleans, and its subsequent management of Hurricane Katrina was badly handcuffed by inadequate resources and by the appointment of political hacks to important administrative positions.  No one disputes that our government's handling of Katrina was an embarrassment:  it was caused in part by a policy of appointing to positions of regulatory authority persons who have publicly expressed their contempt for goverrnment regulation.  Our prior blog entries addressing the Consumer Product Safety Commission listed many examples of this contemptuous treatment of regulation in the Bush administration.

        The failure to allow the Consumer Product Safety Commision to regulate the import of consumer products has  resulted in massive importation of unsafe products from China, including tires that lack standard blow-out protection, childrens' jewelry and toys with accessible lead, and poisoned toothpaste.  Studies have documented that the power to force product recalls (after defective products have begun to cause injury) only pull less than ten percent of the recalled products out of the stream of commerce.

        The Mine disaster in Utah is yet another example of how lax regulation costs lives.  The failure to adequately discipline, sanction and regulate Mr. Robert Murray's 19 U.S. mines and his unsafe mining practices has now caused 9 deaths in Utah's Crandall Canyon Mine.  These are not the first deaths at a Murray mine.  A 22 year mining veteran in Murray's No. 6 Alledonia, Ohio, mine bled to death in 2001 when available first aid was inadequate--resulting in a fine of $15,000.00.  Murray's Crandall Canyon Mine was cited 33 times for health and safety violations in 2007, alone; his most frequently cited mine is in Galatia, Illinois:  it has accumulated 850 federal violations so far in 2007, with $1.46 million in fines.  In 2003, Murray's Owensboro, Kentucky mine operation was convicted by a jury of criminal safety violations and fined 1.4 million dollars:  it appealed and ultimately paid only $300,000.00.

        While Murray claims that he had not changed mining practices at Crandall Canyon, and that the 2007 deaths were the product of a "seismic event", scientists and university researchers unanimously disagree with the latter claim, and public records dispute the former claim.  Crandall Canyon's prior owner, Andalex Resources had determined that it was too risky to mine coal barrier pillars in the mine (a process called "retreat" mining), but the federal mining agency approved just such a plan for Murray at the beginning of this year.

        Even if someone were obtuse and callous enough to argue that the lives of theCrandall Canyon miners and the heroic rescuers who died attempting to help them had little value, it is very clear that ultimately Crandall Canyon has not been managed with economic efficiency.  Millions of dollars have now been spent on the ill-fated rescue effort:  In the long run, compliance with reasonable safety standards and appropriate regulation are cheaper than the ultimate cost of anarchic and illusory voluntary self-regulation.  This is true, whether the casualties of non-regulation are broken bodies, busted pensions, a despoiled environment or a collapsed infrastructure.  Ultimately, what gives our nation strength is the maintenance of an educated populace with a stable and efficient infrastructure (physical, financial and judicial).  China of 2007 clearly demonstrates the alternative to a reasonably regulated economy and culture, and it is not the example we would hold out to our children.

Payouts for Vioxx

        The New York Times reported on August 21 that while verdicts against Merck & Co. arising out of the heart attack risk of Vioxx have garnered a great deal of attention, in fact no single victim has ever been paid even one dollar.  For example, the Texas widow who recovered a 250 million dollar punitive damage verdict against Merck in 2005 is still waiting for the appellate courts to rule on Merck's several claims of appeal.  Her verdict--designed to punish a knowing purveyor of an unsafe product--was reduced to about 26 million dollars by operation of law, and Merck has vowed not to pay any Vioxx-related settlement or verdict.  Her lawyer estimates that she will not receive compensation before the year 2010 at the earliest.

        The pain-killer Vioxx was administered to approximately 20 million people in the U.S., and 105 million prescriptions for Vioxx were written in the five years prior to its withdrawal from the market.  Experts estimate that about 100,000  Americans taking Vioxx suffered myocardial infarctions.  Forty-five thousand people have filed lawsuits and the company has successfully prevented them from being considered in a class action format, arguing (probably accurately) that there is too much individual variation among victim-plaintiffs for them to be considered as a single class. 

        Of the 20 Vioxx suits that have reached a jury (about nine per year),  Merck has won 7 of the last 9, despite scientific evidence that Merck's own  Dr. Alise Reicin characterized as a "great concern" two years before the company took Vioxx off the market.  Despite Reicin's 1997 e-mail concerns and a study that Merck's top scientist, Edward Scolnick said convirmed Vioxx's risks, Merck resisted FDA efforts to add clear warnings to the product.  Merck's recent success at trial suggests that the company can persuade jurors that many of the heart attack claims are not significantly related to Vioxx consumption, and that the remaining legitimate, proveable claims will endure long delays before achieving justice.  Merck has already spent a billion dollars on defending these claims and estimates that it will spend at least four billion dollars more.

        Merck faces no product claims in Michigan.  Michigan legislators have granted drug manufacturers complete immunity for all FDA-approved drugs, even if approval was based upon incomplete or false disclosure by the manufacturer.  The FDA approval process in very heavily influenced by drug industry representatives and paid consultants who compose a voting majority of the approval committees.

Medicare payment revisions

  This week the Federal government announced a new plan to withold payment to medical providers for services that were necessitated by the providers' own negligence.    As a starting point, Medicare will no longer pay for the removal of surgical tools or sponges left in a patient; it won't reimburse for extra care given after the transfusion of incompatible blood or the injection of an air embolism.  Treatment for bedsores that develop in-hospital, hospital falls and certain nosocomial (hospital-acquired) infections also won't be covered.

        While the underlying logic of this strategy is unassailable (why should we pay more to the negligent entity that caused a problem?), it will be interesting to see what happens to candor as a result.  We have seen multiple examples over the years of medical charting that was shaded--or even changed--to obfuscate the cause of a complication.   For example, the Discharge Summary that we were provided after ordering a young woman's medical chart from a local hospital was later identified as a re-written substitute prepared after her torn jejunum was diagnosed during a subsequent admission:  the original damning Discharge Summary which identified the symptoms but failed to rule out the diagnosis was mailed to us anonymously, weeks later, under separate cover.

       Giving health care providers an additional financial incentive to obscure the actual cause of preventable complications may actually interfere with the identification, treatment and understanding of these problems.  The medical community has a long history of applauding the confidentiality of "peer review", where errors are investigated and disclosed, but only in secret procedures.  Some medical and legal authorities believe that this type of secrecy is just and is essential to proper medical care, so there is already a sense within the community that something less than full disclosure is reasonable and fair.  Under these new rules, it is likely that more families will be informed of the "preventable" nature of their complication because of Medicare resistance to payment, but it is also likely that some complications will be even more completely "buried" in the patient chart so that they won't disrupt timely payment. 

        It is also highly likely that some medical providers will order blanket tests on admission to ferret out any existing infection and that providers will order that more patients be restrained to avoid even a minimal risk of falling.  An acceptable risk from the standpoint of the patient's health may be less acceptable to some administrators if it implicates the accounting bottom line.

The dangers associated with lead

     While the human body needs to consume tiny amounts of many non-organic minerals, lead is not one.  So far as we know, lead is of no value to the human body and consumption of lead has devastating consequences for humans--particularly during the early stages of brain development, when it has been widely documented to interfere with neurological development.  Furthermore, the neurological impact is permanent and irreversible.

     Lead is the heaviest "stable" element, however, it does break down when it interacts with certain other elements--particularly sulfur.  Because it is resistant to corrosion and discoloration, it has historically been used in many domestic products including kitchen utensils and water pipes.  More recently it has been used to improve the adhesive properties of paint.  Although its use was banned in interior paints in 1971, lead is still used in the United States to bind exterior paints.  Obviously, in China it is widely used in inferior products because it is cheaper than many other stable minerals.

Now its baby bibs

   As if vehicle tires, toys, toothpaste and children's jewelry weren't enough, now it turns out that baby bibs imported from China are frequently poisoned by lead.  The vinyl bibs, which often sell for as little as five dollars each and carry illustrations like Winnie the Pooh, are sold at Toys "R" Us and Babies "R" Us stores.  Testing confirmed that they contained as much as three times the allowable level of lead.  The importer of the bibs, Hamco Baby Products, encountered a similar problem with bibs it sold in Wal-Mart stores earlier this year.

        The disclosure of lead-contaminated bibs was made on the same day that Mattel recalled 19 million toys manufacytured in China, including a die-cast toy car depicting the character "Sarge" in the animated film "Cars".  The recalls were necessitated by the use of lead paint and the presence of small powerful magnets that were a swallowing hazard for small children.  A Mattel executive acknowledged that "we do realize the need for increased vigilance, increased surveillance".  Nevertheless, that "need" will not be enforced by the federal government which refuses to act to more effectively protect children from harmful imports.  Keep in  mind that studies clearly establish that fewer than ten percent of recalled products are actually removed from the market.  The CPSC "is negotiating" with toy industry representatives to conduct broader testing of imported toys.  Concerned parents should find cold comfort in that reassurance.

"Good hands or boxing gloves"

        The American Association of Justice recently published a thoroughly researched article explaining the massive change that Allstate Insurance Company has initiated in the United States' insurance industry. In 1987, the Insurance Information Institute conclued in its annual report that the industry, while profitable, needed to cut costs and enhance profits in order to compete with Fortune 500 companies for investment dollars.  Twenty years later, it continues to report that the industry has reported "superb", "robust" and "excellent" investment and income results, but it also continues to call for caps on recovery that it originally advocated in the 1980s--despite the fact that the industry was highly profitable (profits increased in the first nine months of 2006, alone, by 15.1 billion dollars) and that the suggested caps had lost 75 percent of their value due to inflation.  By 2006, Allstate had captured returns for its investors that were double that of the Standard & Poor 500, yet it continued to seek higher profits by limiting payouts to consumer insureds.  It had not cut premiums.

        In 1995, Allstate initiated a program it called Claims Core Process Redesign (CCPR) at the suggestion of a corporate consulting company called McKinsey & Co.   McKinsey is better known for having provided consulting services to the Enron Company.   Most people will recall that Enron reported spectacular profits as a result of a novel and illegal accounting strategy, before it crashed and destroyed the lives of its workers and investors.  Under the guidance of a CEO who in 1999 retired with a personal fortune of more than 150 million dollars in stocks, options and incentive buyouts,  and a successor who profited by more than 50 million dollars between 1995 and 1999, Allstate secretly adopted a business paradigm that intentionally manipulated its loss payouts to insureds in order to maximize profits. 

     Historically, courts had required that insurers balance profits with a fiduciary duty to the persons they insured.  In short, the insurer "represented" the policy holder and the relationship was not entirely "at arm's length": in many cases, citizens are even compelled to buy the insurance product in order to operate a vehicle on state roads, for example, or to bid on public contracts.  In return, the insurer recieved various legislative and financial perquisites thought to be necessary to accomplish the purpose of sharing risks broadly.  Thirty years ago, the California Supreme Court characterized this "quasi-public" responsibility of insurers as an obligation of "good faith and fair dealing, encompass[ing] qualitites of decency and humanity inherent in the responsibilities of a fiduciary".

         Taking the Enron philosophy to its core, McKinsey and Allstate increased Allstate's pre-tax operating income [not including investment income] from a decade-long average of82 million dollars a year, to an average of 27.4 billion dollars per year from 1996-2006.  McKinsey and Allstate did not accomplish this by making smarter investments or through wiser risk management.  Rather, Allstate adopted a "zero-sum" approach which internal memos claimed "redefine[d] the game" and "radically alter[ed] our whole approach to the business of claims".    Allstate aimed to reduce claims payments by 15 to 20 percent, and in fact it reduced payouts on auto claims from 69 cents per premium dollar collected, in 1994, to 51.7 cents per dollar in 1998 and 43.5 cents per dollar by 2006.  Parenthetically, this should have resulted in some reduction in premiums but in fact it did not.

        In order to achieve these spectacular results, McKinsey and Allstate devised a "Good Hands or Boxing Gloves" approach, pursuant to which Allstate would pay claims fairly, or promptly, but not both.  Insureds would be offered a choice:  prompt payment of an arbitrarily computed amount (actually eighty percent of similar past claims, apparently)--or incur the expense, risk and delay of bare-knuckled litigation.    This strategy deliberately took advantage of the economic pressures which accompany a significant personal or property loss:  many policy holders would simply be unable to withstand the delay and expense of litigation and be forced to capitulate and accept unjust settlement offers that had been calculated at about eighty percent of past payouts.

        McKinsey estimated that faced with legal expenses and substantial court delays in resolution of a claim, 90 percent of policy holders would throw in the towel.  The remaining ten percent of insureds willing to contest this arbitrary reduction in a claim would be forced in to what McKinsey and Allstate called the "kill box":  no-holds-barred litigation designed not to determine the actual value of a claim, but rather to punish policyholders unwilling to accept less than the actual value of their loss.

        As further assurance of higher profits, the industry also redoubled its assault on victims' rights under state laws.  A full-scale national campaign was engaged (and then fueled with extraordinary profits) to limit payouts by all casualty and liability insurers through changes in the law and marketing to potential jurors.  "Frivolous claims" became a political by-word, despite the fact that no actual proof was offered to document that such claims were a legitimate issue. 

        In an earlier blog we documented the enormous change in the number and size of payouts in Michigan since 1987: insurers have enjoyed particular success in reducing claims and claims payouts in Michigan and have reaped profits that are even more spectacular than nationwide averages as a result.  Refer to "Record Profits..." in our weblog index.      

        Enormous insurers like Allstate, Safeco and Progressive have achieved such startling profits that they have embarked upon a massive stock buyback with excess premium dollars.  Just two y ears ago, Allstate bought back more than 15 billion dollars in stock during the same period it was complaining about large potential weather-related losses and lobbying legislatures for insurance "reform".  While insurance industry spokespeople like Mark Racicot--formerly a top Enron lobbyist and Republican National Committee Chairman, and current head of the American Insurance Association--describe the industry as "high-risk" when responding to critics, the facts show otherwise:  even in 2005 when three of the ten most destructive storms in history ravaged the United States, U.S. insurers declared RECORD profits.

        These record profits have not ocurred by coincidence.  Even while the industry was reporting 44+ billion in profits in 2005, insurance executives were manipulating to enhance profits further.  For example, Jeff Radke, CEO of a Bermuda-based reinsurer, claimed that Hurrican Katrina is a "significant event" for our company...our loss will leave us with enough capital to really thrive in the markety opportunity that's going to follow...this is one of those happy cases where if a rating agency were to insist that we raise capital...it wouldn't trouble us much at all."  AIG Executive Vice President JW Greenberg expressed similar sentiments in an intra-company memo he wrote the day Hurricane Andrew hit south Florida:  "We have opportunities from this and everyone must probe with brokers and clients.  Begin by calling your underwriters together and explaining the significance of the hurricane.  This is an opporunity to get price increases now. We must be the first and it begins by establishing the psychology with our own people.  Please get it moving today.   Lloyd's of London described the September 11 attacks similarly, as a "historic opportunity...where very large profits are possible".

        In short, the American public has been manipulated into a cultural change of significant  proportions through a campaign of deceit and greed.  Led by Allstate and McKinsey, a quasi-public industry that historically balanced state-defined risks and rights in order to broadly share accident risks accross the population, has achieved an Enron-like goal of redefining and diminishing consumer rights in order to record record profits.  Even more disgusting, it has cynically and deliberately profited from catastrophes such as September 11 and Hurricane Katrina, while diverting attention from its record profits to excoriate innocent victims and policyholders.  One can't help but wonder just how long the middle class will allow itself to be manipulated against its own interest by wealthy Enron-like profit-mongers.

       

       

The gap between citizens and Michigan's judiciary

        The gap betweenthe sensibilities of Michigan citizens and the Michigan judiciary was exposed in the recent Barnett v. AutoOwners case.  In Barnett, the jury awarded the Plaintiff exemplary (or "punitive") damages in response to allegations of abuse she suffered at the hands of the case manager appointed by her auto insurer.  The plaintiff was very severely injured in a motor vehicle collision and claimed that she fought a constant battle with the case manager appointed by AutoOwners to manage her medical care.  Mrs. Barnett alleged that the case manager was inappropriately intruding on her privacy and medical care and interfering with her doctors' judgment in an effort to contain AutoOwners medical expenses.  After the Plaintiff died mid-litigation, the case was continued by her son to a verdict against the insurer.

        Applying the harsh standard imposed by the Michigan Supreme Court previously, the Court of Appeals overturned Barnett's verdict.  While each of the three judges offered a different explanation for their vote, the common denominator was an acknowledgement that the improper conduct by the Case Manager was not so repulsive as to meet the high standard imposed by the Michigan Supreme Court.  "The conduct complained [must be] so outrageous in character, and so extreme in degree, as to go beyond all possible bounds of decency, and to be regarded as atrocious and utterly intolerable in a civilized community".  Sadly, we have arrived at a state where our judiciary either relieves the insurance insdustry of any duty, whatsoever, or holds it responsible only for behavior which is "outrageous...extreme...beyond all possible bounds of decency...atrocious and utterly intolerable".  Obviously, a typical Michigan jury would expect more from an insurer.  Justices elected with the financial support of insurers do not.

Physician-patient privilege in the context of litigation

     Normally, a patient's communication with his or her doctor for the purpose of medical treatment is completely privileged and private.  A medical provider cannot disclose these communications except in certain exceptional circumstances.  A good example of an exception to the privilege is the situation involving abused or neglected children.  Because our culture believes that everyone owes a duty to children in this situation, our public policy provides that any medical provider who reasonably suspects abuse or neglect of a child has a duty to report it to authorities, despite the normal privacy of the physician-patient relationship.   

        A similar exception obtains in the context of threats of future danger to an adult.  If a patient makes believable concrete threats against a particular identifiable third-party, the health provider has a duty to respond by reporting the threat(s) to authorities or the at-risk individual.   The privacy privilege gives way to a duty to protect the threatened person.  Generalized, vague threats toward groups or not directed to an identifiable individual do not breach the privilege.

        Another exception to the physician-patient privilege arises where the patient files a legal claim against a health care provider. Obviously it would be inappropriate for a patient to sue his physician and then handcuff the physician's response by refusing to allow the physician to disclose the content of their relationship.  The statutory exception goes a further step, however, and waives the privacy right of the patient with respect to all medical treaters, so that the patient no longer enjoys a physician-patient confidentiality with any other treater.  A similar waiver comes into play when a personal injury claim is filed against other parties allegedly having committed wrongful conduct.

        The litigation waivers do have limits, however.  While they allow the agents of the litigants to obtain almost unlimited access to past and present care records, the attorneys and agents continue to owe a duty to reasonably protect the privacy of the patient within the bounds of the litigation.  Further, the supervising court may impose additional specific boundaries on the use or dissemination of confidential information (for example, in the case of potentially irrelevant information involving abortion, HIV status, sexual abuse or other particularly  private issues).

        The litigation waiver of privilege is a state law exception to the privilege, and it must be balanced with Federal privacy rights.    As the cases have currently interpreted this interplay of statutory rights, the patient must be notified and consent each time a waiver of the privilege is sought.   Thus, the patient who files a personal injury action may be required to waive his privilege on several occasions during the course of litigation, but she or he preserves the right to by notified and to give consent, throughout.   If the patient were to deny consent, her or his injury action would or could be dismissed; nevertheless, notice and an opportunity to consent must be provided.

        The physician-patient privilege does not apply to autopsy examinations and results, as the privilege dies with the patient and information relating to cause-of-death investigation is considered to be a public concern.  As a result, any person can obtain the results of an autopsy examination through the Freedom Of Information Act.  The privilege also does not apply to examinations performed by so-called "independent" physicians retained by employers, insurers or other adverse parties where the examination is not for the purpose of medical treatment.  Whenever a patient submits to such an "independent" examination, he or she is entitled to a copy of the resulting examination report.

Falls on residential property

   The Michigan Court of Appeals has continued to clarify and define owner liability for dangerous conditions on residential property.  A conservative majority on the Michigan Supreme Court has seriously constricted a property owner's liability for defective or hazardous conditions, by eliminating the landowner's duty to correct any defect that a visitor might have identified and avoided.  It has gone so far as to suggest that black ice, for example, need not be addressed because all Michigan residents should expect it at any time, whether in the dark or under snow, during winter months.

        The Court of Appeals has now decided several cases which clarify that this draconian rule does not apply where the State government has created a duty by landowners to provide residential tenants with reasonably safe common areas.  Thus, while a Wal Mart owes no duty to eliminate a hazard in the handicapped bathroom [that injures a blind woman], and a hotel owes no duty to avoid creating a skating pond on its parking lot [that injures a guest, an employee and a responding EMT], at least residential landlords owe a duty to keep their premises safe.

        It is important to note that the conservative Supreme Court Justices did NOT draw distinctions about what conditions are safe or reasonable:  it completely eliminated the property owner's duty to respond to unsafe conditions if they are theoretically identifiable by a sighted person in the daylight hours (with a handful of exceptions involving extreme hazards).  The Court measures the ability to perceive an unsafe condition by evaluating whether an "objective" ordinary person with no physical or age-related issues would be able to identify the hazard in good light (even if the property owner has not provided standard, safe lighting).

Additional information on unsafe Chinese tires

    Chinese tires were in the news again yesterday, as the American distributor recalled a quarter million tires that were manufactured without a "gum" layer that is a standard component to prevent tires from disintegrating on rapid deflation.  The gum layer is a significant safety feature of radial tires that has been a standard American component for decades.  It costs about 30 cents per tire, according to CNN.  CNN also noted that Chinese manufacturers have now captured more than 80 percent of the American market for SUV tires, and about forty percent of the American tire market in total.

     The defective tires weren't identified by the American distributor or by any governmental entity--either Chinese or American.  The Consumer Product Safety Commission does not have the authority to investigate products pre-market; it only has the power to institute product recalls (after a lengthy investigative process that is never swift--but which under Republican administrations is incredibly dragged out).  Thus, a certain number of consumers must be sacrificed before the population can be protected from defective products.  Earlier in our blog on defective Chinese jewelry, we cited the statistics on the effectiveness of product recalls:  only about ten percent of recalled products are actually turned in by consumers in a typical recall, and ninety percent remain in circulation.

     In this case, the defective Chinese tires were discovered by a trial lawyer investigating the deaths of two men killed after a sudden deflation and blow out on a Pennsylvania highway.  The case is a further reminder of one of the original public policy advantages of a robust civil negligence system:  in the absence of governmental regulation, potential civil liability can serve a protective function.

     Sadly, in states like Michigan which don't allow product liability actions against the retailer, consumers have no remedy for defective products as the Chinese government doesn't allow service of process on its manufacturers.  Not only does this deprive injury victims of compensation, but it also shifts the cost of debilitating accidents to the general population in the form of Medicaid and Social Security Disability.  There is an additional cost, however.  Since Michigan retailers have no liability exposure for marketing defective products, they are encouraged to purchase the cheapest products available, and they are not encouraged to investigate these products.  As a result, American manufacturers, who are susceptible to service of process and to liability for defective products, bear additional burdens in the form of quality control and insurance coverage--making it more difficult for American products to be competitive in our own market.

     If our Michigan legislators wanted to assist native manufacturing efforts and enhance the job market here, they would assure that product retailers must stand behind defective products:  the effect would be to eliminate one of the legislative advantages that "tort reform" has bestowed upon foreign competitors.  As we have seen, these competitors are taking advantage of their governmental-gifted immunity to dump cheap, defective products on our markets.  Not surprisingly, the Chinese government has defended the tires being recalled and objected to the effort to remove them from the market.

More on unsafe products from China

The New York Times on August 6 confirmed that lead-poisoned trinkets are continuing to flood the American market, primarily from Chinese sources.  In addition to the recent recalls involving Mattel, Hot Wheels, Barbie, Thomas the Tank and other well-known products, children's inexpensive jewelry is also a pervasive problem.  Inspections of 85 jewelry items by the Consumer Product Safety Commission showed that twenty percent of imported children's jewelry posed a poisoning hazard.  Of the 17.9 million pieces of jewelry pulled from the market since 2005, 95 percent had their origin in China.  Health officials in Massachusetts, Maryland and Ohio found lead contamination (more than .06 percent lead content) as often as forty percent of the time in products investigated. 

        Despite reassurances by well-known sellers and manufacturers that the lead-poisoning problems have been solved in the past two years, federal and state authorities continue to find lead toxicity involving products sold at Wal-Mart, Toys "R" Us, Safeway and K-Mart.  A give-away pendent embossed with the Reebok logo was recently removed from a young victim's stomach at autopsy.  Contamination has been found at levels more than 100 times greater than the mandated safe limit.  Product recalls are not adequate to ensure childrens' safety, as demonstrated by Twentieth Century Fox Home Entertainment's offer of a free DVD to customers who returned silver-coated charms containing lead.  Since the recall was announced in spring of 2006, only about 50,000 (6.7 percent) of the 746,000 charms recalled, have been returned.  Fox Home Entertainment is a division of Fox News, which, not surprisingly, has spent far more time reporting on Paris Hilton than it spends reporting on lead jewelry poisoning our children.

          Prodded heavily by the Sierra Club, the CPSC is finally considering a ban on lead in children's jewelry.  The only objection to the proposed ban contained in the 195 pages of public comment collected at the CPSC is a letter from the government of China, which argues that the ban is "unnecessary" and that it will increase the cost of jewelry and inhibit trade.  Since the Chinese government does not allow Chinese manufacturers to be sued for product liability, American consumers have no recourse against the source of dangerous products produced there.  Since Michigan tort "reform" eliminated liability for retailers of unsafe products, Michigan victims are often left without recourse altogether.

More limitations on premises liability

      The Michigan Supreme Court recently decided that a landowner conducting dangerous activity on his property should owe no duty to persons injured off the premises.  There is no Michigan statute which addresses this question, so the Court was required to analyze and address the issue as a matter of judge-made "common law".  The case involved the death of the wife of a worker who routinely laundered the worker's clothes and was exposed to asbestos fibers as a result.

         The Defendant's property was contaminated by asbestos.  The Plaintiff died after prolonged illness resulting from exposure to her husband's work clothing.  She laundered the clothing for him on a regular basis and no one disputed that her death was a result of contact with asbestos carried home from Defendant's property on her husband's clothing.

         The federal government has previously concluded, after substantial study, that no environmental exposure is more dangerous than asbestos.  It is extremely toxic with clearly demonstrated and substantial detrimental health effects.   Exxon Mobil knew of the "take-home" risk of asbestos as long ago as 1937, however, the majority of our Supreme Court ignored this confirmation of known risk.  Further, by government regulation a property owner is now required to manage and control the "take-home" risk of asbestos, as the health risk to off-site persons such as this housewife have been very clearly documented in prior years.

        As long ago as 1916, employers  were urged by safety publications to launder contaminated work clothing on site.  The Occupational Health and Safety Administration began regulating "take-home" clothing in 1972.  In the 1960s, admonitions about the safety of laundering asbestos-exposed clothing were documented, yet the "industrial apologists" on our Supreme Court not only refused to impose a legal duty; they also engaged in an intellectually superficial examination of the "foreseeability" of injury without a full hearing on the merits.  In other words, they gave lip service to a weighing of social cost and benefit without allowing the issue of negligence to be fully addressed.  After engaging in what it called a "weighing of competing social policy considerations" (i.e., the relative advantages and costs of imposing responsibility) the four right-wing jurists who speak for the Chamber of Commerce on the Michigan Supreme Court concluded that a property owner should owe no duty to a person injured when not on the premises, regardless of any issue of negligence.   One of the three dissenting Justices noted that the majority showed an unseemly interest in the corporate cost of regulating asbestos without giving any consideration to the health cost for individuals.  As Justice Kelly wrote, "it is a sad day" for our citizens when our Supreme Court responds to one of the greatest and most expensive environmental health catastrophes of our time by eliminating corporate responsibility and leaving individual victims to bear the associated cost.  It is also stupid public policy to impose that cost on the workers and their family who cannot control the risk, rather than placing the duty where it belongs:  on the entities with the knowledge, resources, authority and legal duty to impose appropriate controls.

      Oddly, Justice Young provided the deciding fourth vote in the case, despite his firmly-stated conviction that the Court lacked the constitutional basis to even decide the case.  We can only suppose that he was more interested in the (no liability) result than he was interested in the underlying legal analysis.

      Sadly, these Justices are so jaundiced and so deeply biased in favor of their corporate supporters that they simply cannot or will not recognize the costs borne by an injury victim.  They can read a spreadsheet pretty well (especially if it relates to corporate profits or campaign advertising expenditures); they don't do as well with the New Testament.

The discovery rule

        In yet another activist repudiation of justice, the controlling majority of Michigan's Supreme Court ruled in July of 2007 that it would no longer recognize the "discovery rule" in Michigan.  The latter rule is recognized in most states and was recognized in Michigan for decades as an exception to the normal statute of limitations.  If an injured victim is unable to sue because he or she could not identify the wrongdoer, historically he was allowed a limited time in which to act after the wrongdoer could reasonably be discovered.

          The activist Republicans who tossed out the discovery rule were not joined by the one moderate Republican or the two Democrats.  They adamantly opposed and criticized this repudiation of established precedent.  The decision was handed down in a case that arose out of the murder of a woman by the employee of a landscaping company in the 1980s.  The woman's killer was not identified until DNA testing was performed in 2002 and the killer was identifed, arrested and convicted.  The woman's Estate filed suit six months after the killer was identified and no one disputes that the Estate had no basis to suspect the killer previously.

          The callous majority's decision overrules more than 100 years of Michigan precedent, and the dissenting opinions pointed out that overruling this caselaw violates every precept which the majority had previously trumpeted in opposition to judicial activism.  As Justice Kelly describes it, "the majority's decision throws Michigan into topsy-turvy land where a person's legal claim dies before it is born".  Sadly, this right-wing majority is far more interested in maintaining empty, unused courtrooms than in dispensing justice.  By way of contrast, note the criticisms of China's court system voiced by international experts:  it is suggested that a primary reason China cannot enforce reasonable safety regulations on consumer products is the lack of an impartial judiciary.  How ironic to think that the right-wing in Michigan would be urging us in the direction of a Communist totalitarian government in the name of "progress." 

Federal Regulations and trucking safety

   Despite Federal studies that demonstrate a sharp increase in driving fatalities associated with driving more than ten consecutive hours, the Bush administration recently revised federal regulations to allow truckers to drive for 11 consecutive hours, rather than the ten hours previously allowed.  The Bush administration ignored its own safety studies and caved in to industry pressure in order to enhance corporate profits.

        Fortunately, two successive federal courts have now struck down this relaxation of driving rules, citing the Federal Motor Carrier Safety Administration's own research into safety and consecutive hours of driving.  The Court of Appeals' recent decision was unanimous.  Hopefully, if the issue gets in front of the U.S. Supreme Court, Justice Anthony Kennedy will join with the moderates and not with the right-wing activists who have been rubber-stamping the interests of the Republican Party.  Insurance companies would probably object to this relaxation of regulation, however, several months ago, the Federal Government threw a sop to their lobbyists by limiting liability exposure of interstate trucking companies.

Inconsistent cancer treatment and newly adopted guidelines

  Recent work in the medical industry confirmed the inconsistency of cancer care in America.  The physician authors confirmed that despite the many burdens they are already carrying, cancer patients and their families must actively research and control the care they recieve and advocate on their own behalf in order to be assured of proper care.  Dr. Nina Bickell of Manhattan's Sinai Hospital noted that despite the wonderful breakthroughs in American medicine, many patients who would benefit do not receive them.  A 1999 report by the Institute of Medicine in Washington concluded that "there is a wide gulf between what could be construed as the ideal and the reality of [American's] experience with cancer care."

       Dr. Stephen Edge, of the Roswell Park Cancer Institute in Buffalo, noted that "it's scary how much variation there is" in drawing attention to new rudimentary guidelines for cancer treatment.  "While they're fairly simple and straightforward, and they seem very basic, it's quite surprising how many people do not get the care that's recommended".  The guidelines are available at www.facs.org/cancer/qualitymeasures.html. 

        The primary causes of inconsistent care are considered to be varied.  One cause is a common denominator of most sub-standard medical care--simple lack of experience.  Doctors who treat a particular condition or who perform a particular procedure repeatedly gain proficiency with practice.  So do the hospital staff that they rely upon.  Cardiac studies have shown that open-heart surgery is safest where the entire OR staff performs more than 200 procedures per year.  Pathologists gain skill in recognizing aberrant cells if they study abnormal cells on a consistent basis.  Specialization carries inherent rewards in proficiency.  Other explanations for inconsistent care included poor communication, lack of screening (either by the patient or by the medical provider) and failure to seek a second opinion from a tertiary care center.

Hospital "nosocomial" infections

        A Veterans Administration hospital in Pittsburgh has performed research and instituted new procedures that are shedding new light on the subject of hospital infections.  When you gather many ill people under the same roof and then create openings in their protective skin-covering, infection is a signficant and deadly concern.  It has long been recognized that many patients actually acquire infections in the hospital, and studies show that such infections occur more commonly in tertiary care or regional referral hospitals than in community hospitals.  Thus, part of the problem is not merely cleanliness and proper procedures:  part of the problem is the relative illness of the patient-base.  It has been more-or-less assumed that these infections cannot be eliminated or controlled and that nothing can be done to prevent the spread of antibiotic-resistant germs that may thrive in hospital settings.

        The work done at the Pittsburgh VA in conjunction with the Centers for Disease Control and Preventation,  however, shows that the 1.7 million nosocomial infections that occur in the U.S. each year can be controlled.   Data shows that one of every 22 hospitalized patients develops infection and 99,000 of these patients die each year.  The recent studies have focused on the benefits derived from active screening and isolation of incoming patients, combined with "a relentless focus on hygiene".  At the VA Hospital, this reduced the number of methicillin-resistant Staph infections from more than 60 per year to only 17.  The 40-bed surgical unit cut its infection rate by 78 percent.  Several European studies have documented similar results and Netherlands and Finland have virtually eliminated methicillin-resistant Staph through similar efforts.

        Eighteen states now require hospitals to disclose their infection rates publicly, however, citizens in most states, including Michigan, do not have access to this information.  Further, it is very hard to pursue a malpractice claim arising out of a nosocomial infection because many health care providers consider them to be unavoidable.  The theory goes like this:  "If it can happen without 'fault', and you can't prove our rate of occurrence or the procedures we follow, you can't prove that it happened to this patience because of our negligence."  This argument is effective in Michigan and many other states. 

        Betsy McCaughey, New York's former Lieutenant Governor, noted the irony in the fact that most hospitals screen for HIV on admission, but not for bacterial infections, despite the fact that bacterial infections account for SEVEN TIMES as many deaths as HIV and the annual cost of treatment runs in the tens of billions of dollars, nationally.  Apparently, HIV just sounds scarier.

Employer responsibility for rape

     The Michigan Supreme Court controlling majority once again came down firmly on the side of corporate American and the insurance industry, when it held that a woman who was raped by a plant foreman on the nightshift could not sue their employer.  The radical Republican majority held that the woman, Lisa Brown (who worked as a night-shift security guard at Samuel-Whittar Steel, Inc.), had no recourse against the employer, even though the rape was not an isolated event and Lisa had repeatedly voiced complaints to the Plant Manager about verbal threats made to her by the perpetrator. 

        The unabashed majority rationalized its holding with the dubious claim that it is not enough that the employer had warning of the rapist's "vicious tendencies"; they held that the employer is not responsible unless the employee's lewd comments "convey an umistakeable, particularized threat of rape."  If you think that your daughter or sister is a little less safe today, because of the callous majority's refusal to hold employers resposible for inappropriate and potentially-violent behavior, you are right:  employers can refuse to address escalating complaints of this nature with impunity.  If you are embarrassed by the callousness of our Justices, join the rest of us who shudder at their superficial result-oriented activism.

More safety problems from China (Mattel)

  On August 1 of 2007, the American toy-maker, Mattel, initiated a massive recall of a million toys; 83 products were recalled including HotWheels cars and Barbie dolls.  All were made in China and all were colored with lead-based paint.  Identification of unsafe toys can be made through web-sites at the New York Times, Mattell, Inc., and the Consumer Product Safety Commission (cpsc.gov).  Nancy A. Nord of the CPSC admonished that the lead paint is "accessible" and the toys "should be taken away from children". 

      This problem was identified by a European retailer of Mattel toys in July.  A Mattel executive noted that the safety problem was encountered with a Chinese supplier who "has worked with us for 15 years" and "understand[s] our program".  Mattel makes about half the toys it sells and out-sources the remainer to China.  Lead paint exposure and consumption causes brain damage and children are particularly vulnerable.  Elsewhere in our weblog, we have addressed prior concerns over Chinese manufacturing safety and the weaknesses in regulation and inspection of Chinese products including food.  We have noted that Michigan residents have no recourse against retailers who sell defective Chinese products and that the Chinese government does not allow legal actions against Chinese manufacturers.  Crippled Americans must be satisfied with Chinese "justice", consisting of executions and retribution, rather than American justice which has always put an emphasis on prevention, risk-sharing insurance and compensation.

        By the way, on July 26, Beijing unveiled new efforts to improve its image with regard to product safety and apparetly retained Ogilvy Public Relations, an international crisis management (public relations) firm.  Henk Bekedam, the World Health Organization's top man in China noted that there are no quick fixes for the underlying problem:  China's corner-cutting on safety to facilitate growth in the economy.  The government recently acknowledged that 20 percent of consumer goods and 14 percent of truck tires manufactured in China failed safety inspection, according to the July 29 New York Times.  According to an associate professor at the Sloan School of Management at MIT, the primary problem is the lack of an independent judiciary which makes law enforcement impossible and regulations meaningless.  There is no impartial enforcement of the law.  Sadly, it seems that our country is headed in the same direction, as the Chamber of Commerce grasps ever-firmer control over the machinery of our judiciary.

Head injuries and new research

    On August 1, 2007, the journal Nature published a new report documenting the case of a 38 year-old man who was awakened from a barely-conscious state through electronic brain stimulation.  The man had suffered a depressed skull fracture and severe brain injury in an armed robbery and beating, and had not regained full consciousness in more than five years (the NYT reported more than five years, NPR reported 8 years).  The man's recovery has not been complete, but he can now converse with his mother over simple issues; previously, he had remained in a virtual sleep-state.

        The recovery was achieved by means of a deep brain stimulator implanted  in the thalamus at a site that controls sleep and waking states.  Researchers were quick to point out that this procedure was not helpful when attempted with Terri Schiavo and that the patient must have evidence of some brain function for it to work.  This patient was minimally responsive over the years and testing showed that certain language and intellectual functions of his brain remained intact.  The procedure was performed at the Cleveland Clinic.  A neurologist at Cornell reported the results, along with the Clinic physicians.  They note that the patient shows clear, objective improvement in function during the 12 hours per day when the implant is activated, and that he regresses in function when it is off.  While he has thus far been unable to develop new memory, he is once again an individual--even if his functional capacity is incomplete.